Autumn Budget 2017

Corporation Tax


Corporate Chargeable Gains

When a company sells an asset on which it has made a Capital Gain it has been able to claim an Indexation Allowance, so that any gain that has arisen as a result of inflation was not charged to tax.

The Chancellor has now frozen the calculation and availability of indexation allowance for companies for the disposals of assets on or after 1 January 2018. Indexation allowance will be calculated by using the Retail Price Index factor for December 2017, irrespective of the date of disposal of the asset.  The indexation allowance has long since been abolished for individuals, so this is bringing Income tax and Corporation Tax rules more in line.

Corporation Tax will continue to be charged at a rate of 19% for the year commencing 1 April 2018.

 

Research & Development Expenditure – Credit Increase

The Budget increases the tax relief for large companies (and some SMEs) that carry out qualifying R&D and claim the RDEC.  The RDEC (also known as the ‘Above the Line’ credit) is a standalone credit that is brought into account as a receipt in calculating profits. The current general rate is set as 11% of qualifying R&D expenditure. This announcement increases the rate of the RDEC from 11% to 12% for expenditure incurred on or after 1 January 2018.

SMEs have their own scheme which is much more beneficial.  However, companies whose projects are “state aided” are forced into the large company RDEC scheme and so the above measure will also be of benefit to them.  The SME scheme is unchanged. This allows qualifying companies to:

  • Deduct an extra 130% of their qualifying costs from their yearly profit, as well as the normal 100% deduction, to make a total 230% deduction against taxable profits
  • Claim a tax credit if the company is loss making, worth up to 14.5% of the surrendered loss.
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Feb 22

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